Pollution and premature deindustrialization: examining the effects of black carbon on manufacturing employment in developing countries

Vilio, Adam; Sexton, Emmett; Chaar, Tania; Bester, Jan

Pollution and premature deindustrialization: examining the effects of black carbon on manufacturing employment in developing countries

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Vilio, A, Sexton, E, Chaar, T, Bester, J. Pollution and premature deindustrialization: examining the effects of black carbon on manufacturing employment in developing countries. 2024. handle: http://hdl.handle.net/10230/69941

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Abstract

This study investigates the impact of pollution on manufacturing mployment shares in developing countries , contributing to previous literature on the potential causes of premature deindustrialization. Analyzing data from 112 low, and low-middle income countries between 1998 and 2021, we employ wind speed as an instrumental variable to address endogeneity concerns. Our findings reveal that higher pollution levels significantly reduce manufacturing employment shares, with a pronounced effect in regions such as India, South America, and Africa. At the state level in India, a 10% increase in pollution is associated with a 0.87 percentage point decrease in manufacturing employment shares. However, this effect is less evident at the district level, suggesting that the relationship may be more influenced by policy making at national and state levels. We explore the role of international climate policies, such as the Clean Development Mechanism (CDM), in shaping these outcomes. We find that CDM projects do not significantly alter the pollution-employment relationship, opening avenues for future research to explore other potential mechanisms, such as the productivity impacts of pollution on workers and the subsequent effect this has on firms’ location decisions.